Above we see a multiday view of the ES futures. Note how we took out the October 15/16 highs on Monday, fell back, but now are trading above those. That frames the big issue for this morning's trade: will we see a continuation of the upmove into the 1100 area, or will we fall back into the multiday trading range? Thus far, investors have been responding positively to favorable earnings news--itself a useful sentiment gauge.
To this point, I have seen little deterioration in the Technical Strength (short-term trend status) of the 40 stocks in my basket, with 31 in uptrends, 5 neutral, and only 4 in downtrends. (The trend measure is updated daily before each market open via Twitter; follow tweets here). We did see some stalling out of new 20-day highs on Monday; advance/decline strength was good, but tailed off somewhat during the day. I'll be watching closely today to see if we can expand the breadth of this rally on the heels of recent good earnings news.
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2 comments:
Dear Dr Brett,
I would also point out several divergences that I was able to see only recently :
* Henry Carstens' forecast trend indicator (Trend Day/Range day) has been pointing towards "range" these days while the market continued to trend higher
* In your morning Twitter, the Supply/Demand indicator diverged a lot from your basket of 40 stocks (e.g. in yesterday's tweet : "Fri: 799 20-day highs, 402 lows; Demand 26, Supply 97; Basket: 32 stks uptrend, 3 neutral, 5 dn" ; same applies to Wednesday's tweet)
I don't know what to think of it. Is it because of the earnings ? Or is it just me who didn't notice this before ? :P
(Also, I keep track of the intraday volume in the ES and it remains very average with the notable exceptions on big down days, e.g. October 1st or September 30th)
A little off topic, but I see a realization that profits are coming from reduced employment costs - hence increased productivity. However, the consumers are not benefiting from this and the Federal Treasury is funding the unemployment benefits. This amounts to a transfer of funds from the treasury to the companies and their executives and stockholders.
This can not continue as ultimately consumers drive the economy. Could this be driving the divergences and indicating a correction coming? Also the AAII sentiment is bulllish which is a contrary indicator.
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